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Electric Power

German renewable power levy set to peak 2021; modest gain seen for 2020

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German renewable power levy set to peak 2021; modest gain seen for 2020

Highlights

First generation wind/solar contracts end in 2020s

Agora sees levy peak at Eur70/MWh in 2021

Levy eased for 2019 after tripling since 2010

London — Germany's renewable power levy is forecast to peak at around Eur70/MWh ($77.73/MWh) in 2021, when subsidized contracts for first generation wind and solar projects will start to fade and lower costs for new projects begin to filter through, think tank Agora Energiewende said Saturday.

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The levy may increase by as much as 4.5% to a range of Eur65-67/MWh in 2020, Agora said.

Last year, the levy dropped 6% to Eur64.05/MWh amid a large account surplus from rising wholesale power prices boosted by higher EUA carbon prices.

The so-called 'EEG-Umlage' tripled since 2010 to a record Eur68.88/MWh in 2017.

The surcharge eased slightly in recent years after the government reformed the way renewable operators are compensated.

Under Germany's EEG renewable energy law, the gap between fixed feed-in-tariffs and wholesale power prices has to be financed by all consumers through the levy.

In total, electricity consumers have to finance some Eur25 billion/year for renewables, with only the most energy-intensive industrial users exempt.

German TSOs set the levy each year by October 15.

The key reason for the expected modest rebound in 2020 was strong offshore wind additions, with higher compensation rates, as the final projects under legacy feed-in-tariffs are set to come online, Agora said.

Feed-in-tariffs for onshore wind already ended last year, with new projects now awarded subsidized contracts in competitive auctions.

A reduced account surplus -- down by around Eur1.5 billion compared with last year -- is also set to limit consumers' rebates, it added.

Above-average wind generation for much of the past 12 months is set to boost payments, while the benefit of higher wholesale power prices has faded slightlycompared with last summer.

German renewables' share in the power mix rose to a record 44% in the first half of 2019, well ahead of a 35% government target for 2020, utility lobby group BDEW said last month.

The government now targets a 65% RES share in the power mix by 2030 as it plans to phase-out coal.

Germany currently has 120 GW installed renewables capacity of which 60 GW is wind, 47 GW solar with biomass and hydropower making up the remainder.

-- Andreas Franke, andreas.franke@spglobal.com

-- Edited by Manish Parashar, manish.parashar@spglobal.com